This paper proposes a compensating algorithm for the secondary voltage of a coupling capacitor voltage transformer (CCVT) in the time domain by considering the hysteresis characteristics of the core. The proposed algorithm estimates the three error terms i.e. the voltage across the secondary winding parameters, the voltage across the primary winding parameters, and the voltage across the capacitor and the tuning reactor. These three terms are added to the measured secondary voltage to obtain the correct voltage. The algorithm reduces the errors of the CCVT significantly both in the steady state and during a fault. The performance of the algorithm is verified under the various fault conditions by varying the fault distance, the fault inception angle, and the fault impedance with the EMTP generated data. Test results clearly indicate that the algorithm can increase the accuracy of a CCVT significantly under the fault conditions as well as in the steady state. The algorithm helps improve the performance of a protection relay or a metering device.